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NAIC Passes Market Conduct, Annuity Reserving Proposals

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A market conduct analysis program that had generated enormous controversy was affirmed by the National Association of Insurance Commissioners during its fall meeting here.

The MCA Statement was one of a number of proposals that state insurance commissioners made official NAIC policy. Others included: a model regulating the use of senior designations; the adoption of Actuarial Guideline VA-CARVM, which establishes more flexible reserving for variable annuities with guarantees; and a model regulation to implement Medicare supplement standards.

By far the most controversial of the measures adopted was the MCAS, which received extensive back and forth from commissioners voting on the issue.

Two versions of the MCAS were adopted by commissioners. Combined details of the 2 models affirmed by the NAIC include: provisions that have been discussed, such as a state specific data requirement that would be stored by the NAIC and require discussion for additional data elements. A transition period in 2009 would be created and filing for 2010 would start in 2011.

Significant debate resulted in it being left open as to whether data would be collected through the annual statement or through a state’s market conduct program. One reason cited was that data that could be developed under existing market conduct authority would be more “robust” than it might be under an MCAS.

While insurers had opposed the proposal, consumer representatives asserted that the MCAS is critical to understanding and improving the insurance marketplace.

Actuarial Guideline VA-CARVM was adopted nearly unanimously. Connecticut Insurance Commissioner Tom Sullivan expressed concern about dynamic hedging, saying an insurer would only be “as strong as one’s counterparties.” Sullivan noted the current crisis at AIG.

Another proposal, the senior designations model, which regulates how advisors use designations that promote them as experts in giving advice to seniors, sailed through plenary.

So did a Medicare supplement standards model. The model was prompted by a change in federal law which created new standards prohibiting insurers from using genetic information against insureds. Regulators were required to create standards to reflect this change or, if they failed to do so, have the federal government develop its own standards.


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